A 529 plan is one of the most popular ways to save for college, or it can be used for elementary or high school tuition, too.1 Just about every state sponsors a plan, so no matter where you live in the U.S. (and as long as you're a citizen) you can save in any state's plan. Even better all contributions grow tax-deferred, and the earnings can be withdrawn tax-free, as long as it's for qualified expenses such as tuition, books, supplies, and other costs. Our advisors can help you navigate the requirements, benefits, and tax implications, so you can make the right choices for your family.
If you place $250 a month in a 529 plan for your newborn, by the time they're 18 you'll have socked away quite a lot.2
Benefits of 529 plans
All the money you put into a 529 plan will grow tax-deferred, and withdraws are free from federal income tax, as long as the money is used for qualified education expenses.
Less impact on financial aid
When calculating financial aid, 529s are considered a parent's asset so it's weighted less than if it was the student's asset. So your child could qualify for more aid like scholarships, grants, and loans, if needed.
There are no income or age restrictions, so just about anyone can open and fund an account—parents, grandparents, other relatives, even family friends.
The account owner makes sure the money goes toward qualified costs and can transfer unused funds to another beneficiary (e.g., a family member of the original beneficiary).
What's the difference between 529s and other college savings plans?
A key part of any education savings strategy should be the use of tax-advantaged savings accounts. The right option for you will depend on your income and family's needs.
529 savings account
You can use the money for college, elementary or high school, and earnings will grow federal income tax deferred, and withdrawals taken to pay for qualified expenses are also free from federal income taxes.
Coverdell savings account
Help cover the costs of kindergarten through 12th grade, or college. Like 529s, they grow tax deferred, however, there's a $2,000 yearly contribution limit and those with higher incomes might not be eligible.
Uniform gifts & transfers account
Known as UGMA/UTMAs, they let parents (and others) gift money to children. Earnings are taxed at the minor's tax rate, and unlike a 529 or Coverdell account, the money can be used for college or anything else.
Parents, grandparents, aunts, uncles, cousins, even friends. So instead of giving a traditional gift on holidays, birthdays, or special occasions, you can encourage friends and family to contribute to your child's education. Starting early is key. Even if you feel like most of your disposable income goes to disposable diapers, the more you sock away, the more your savings will have a chance to grow.
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Questions about 529 plans? We've got answers.
No. You can use a 529 plan from any state to pay for qualified expenses in any other state. So, you can use funds from a 529 plan in Oregon to pay for college in New York. From a tax perspective, there could be tax deductions or credits that you can take advantage of based on contributions to a particular state's 529 plan. Ask an advisor which 529 plan is best for you, get matched with one today.
There are no yearly limits for a 529 plan, but each state has their own lifetime limit per beneficiary (most are high enough that it's unlikely you'll hit the ceiling). Talk to an advisor about how you can maximize your savings. Get matched with one.
You can use the money from a 529 plan to pay for qualified expenses such as tuition and fees to elementary, high school, or college. You can also use the funds to help pay for things like room and board, books, supplies, computers, and internet service. You can even use unused funds to help pay down student loans.
Anyone who lives in the United States and is aged 18 and over can open an account. So parents, grandparents, aunts, uncles, cousins, even friends can contribute money to help pay for a child's education. Find out more on how to set up your 529 plan.
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